Putting the Patient in Charge

About the Author

The idea of giving patients the "right" to sue managed-care
companies that refuse to pay for certain medical treatments-at the
heart of almost every "patients' rights" bill before Congress-may
sound like a promising remedy. But as a solution to the
health-insurance crisis, it would be about as effective as
leeches.

Sure, the threat of litigation may cause managed-care companies
to think twice before rejecting certain services. But more lawsuits
also mean larger premiums and higher out-of-pocket costs. Employers
will have to charge their workers more for insurance or stop
offering it altogether. No wonder House Majority Leader Dick Armey
of Texas referred to one bill prescribing lawsuits as "the least
worst way to do the wrong thing."

The fact is, lawmakers have made the wrong diagnosis. They need
to recognize that "managed care" is the logical outgrowth of a
health-care system that makes it all but impossible to buy
insurance except through one's employer. Until this link is
severed, health-care costs-and the efforts of managed-care
companies to control them-will continue to increase.

The problem is that the person using medical services-namely the
patient-is shielded from the cost by our "third-party" payment
system. From sprained ankles to organ transplants, employers are
the ones paying the bills. It was their legitimate desire to tame
costs-driven by years of double-digit inflation-that ushered in our
age of medical micro-management.

This wouldn't have happened if our tax system didn't
discriminate against individuals who would otherwise buy health
insurance on their own. Remember: Employer-provided insurance is
paid for with pre-tax income. Those who want-or need-to buy a
health-insurance plan different than the one offered by their
employers not only risk forfeiting this benefit, but must use
after-tax income to do so. The additional cost can run to hundreds
of dollars a year.

Naturally, most employees opt to stay with their employer's
plan, no matter how bad it is. And since they're not the ones
footing the bill, they have no incentive to use the system in a
cost-effective way.

To illustrate how absurd this is, imagine buying car insurance
in this manner. Picture yourself pulling out your insurance card
and filling out dozens of forms just to get an oil change, or
getting a referral from your "primary mechanic" before taking your
car to a transmission specialist. Both insurance and repair costs
would climb sharply. Drivers would never tolerate this level of
interference. So why handle our health care this way?

The best reform model is called "premium support," in which
employers shift from providing insurance to providing money for the
purchase of insurance. No longer would employers mandate a
"one-size-fits-all" health plan; they would simply give employees a
specific amount to be applied toward the purchase of any health
plan the employee chooses. If dissatisfied, employees would have
the right to change plans. And they could carry coverage from one
employer to the next.

"Whatever passes the House will have some form of liability,"
promises Rep. Tom Coburn, R-Okla., a co-sponsor of one of the
current health-care bills. But if workers were able to spend their
own money directly on health insurance, they wouldn't need
government-mandated grievance procedures or avenues for
litigation-the presence of a true market would allow them to select
the plan that's right for them, and switch if they don't get what
they bargained for. Putting the patient in charge is the healthiest
solution for everyone.

Edwin Feulner is president of The Heritage Foundation
(www.heritage.org),
a Washington-based public policy research institute.